SA property globally competitive

The South African commercial property market achieved returns of 26.7% in 2006, placing it among the top performing markets worldwide, according to the Investment Property Databank (IPD).

This was South Africa’s second-highest annual return since the inception of the IPD Index in 1995, following a return of 30.1% in 2005, signalling a levelling off in the property cycle.

According to the index, released on Tuesday, the three-year annualised return for SA commercial property was 26.7%, equivalent to the total return of 2006, while the five-year annualised return was 20.8%.

“This is another year of stunning performance for South African commercial property” IPD managing director Stan Garrun said in a statement, adding: “It is in a sense a cooling of exceptionally high returns in 2005, reflecting changing dynamics in the market.”

Speaking to Business Report, IPD United Kingdom director Simon Fairchild said that South Africa’s second place on the list was “pretty assured”, and that it was a significant, though small, contributor to the global property index.

“[South Africa] is a top performer and one of the more developing economies in the index,” Fairchild told Business Report.

The country’s industrial sector led the way for the second consecutive year, with returns of 31.1%. Returns from the retail sector dipped from 32.6% in 2005 to 27.4% in 2006, while the office sector provided returns of 24.5%.

“Offices were possibly expected to perform relatively better, but are well grounded for future growth in the underlying fundamentals,” Garrun said. “Vacancies continued to decline across the board, reaching their lowest levels [4.2%] in 10 years.”